Our WR Transport index fell 0.5% last week, underperforming the 1.6% rise in the S&P 500. The Integrators (FDX/UPS) outperformed last week (+2%), while the Forwarders (-3%) lagged the most.
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We spoke with consumer products shipper about the potential impact of coronavirus on global air and ocean trends. Our contact noted that production in China isn't close to normal levels yet with many people not yet back at work. Additionally, there are a lot of logistical challenges in China with local trucking for loading and conveying. So while there have been some blank ocean sailings, our contact has not seen backlogs of freight in China build up yet. But this shipper believes the situation will change very quickly and expects the biggest issues with finding airfreight capacity. Capacity right now is essentially limited to freighters as passenger airlines have effectively cut almost all their flights. As a result, inbound rates to China are already tracking up ~50% from normal levels. Outbound rates haven't spiked yet given factory delays, but once production ramps, our contact believes airfreight rates out of China could spike to 2x-3x previous levels.
This morning, R reported a 4Q adjusted EPS loss of ($0.01), below Cons. of +$0.03. R also provided C20 EPS guidance of $1.30 at the midpoint, materially below prior Cons. of $2.56 including a much larger than expected loss in 1Q:20. The stock fell another 10%.
R reported an adjusted 4Q EPS loss of ($0.01) vs. Cons. of +$0.03, our estimate of +$0.01 and prior guidance of ($0.03)-+$0.07. Dedicated results were slightly better than our expectations, SCS results slightly worse, and FMS results materially worse than we expected, offset by a much bigger tax shield in the quarter. Losses on sales of $10M were worse than our $5M expectation but improved from a $23M loss in 3Q.
Our WR Transport index rebounded 4.0% last week and outperformed the 3.2% rise in the S&P 500. We had some big moves last week, including double-digit increases for USX, HUBG, ODFL, SAIA, and AAWW. Overall, the LTL and TL stocks performed best last week, while the Truck OEMs performed worse.
Pasted below, please find our Friday Freight note. We distribute this product via email each Friday mid-day, so clients have some freight reading material to make their weekends truly worthwhile! Your feedback is always appreciated if you have any suggestions.
USX reported a 4Q EPS loss of ($0.05), better than Cons. of ($0.09) and our estimate of ($0.10) but down materially from +$0.39 a year ago. TL margins fell over 600bp y/y but were 130bp better than our model, but note that 4Q included $3.9M of property gains that boosted TL margins by 100bp and EPS by $0.05. So underlying TL results were in line with our expectations, and brokerage posted a $2M loss vs. our break-even expectations. On the headline beat, the stock popped 13%.
ODFL reported 4Q EPS of $1.80, but excluding a $0.16 charge related to the change in phantom stock accounting and a $0.05 tax benefit, underlying EPS of $1.92 was much better than our estimate and Cons. of $1.79. Tonnage (-4.5% y/y) was 100bp better than we expected, yields (+4.0%) were in line, and margins were 100bp better. The stock rallied 5% on the day.
After the close (02/05/20), WERN reported adjusted 4Q EPS of $0.67 vs. Cons. of $0.60 and our estimate of $0.59. WERN’s earnings held up much better than most TLs again in 4Q with 3% avg. fleet growth and positive Dedicated pricing & margins helping to offset weak utilization and one-way pricing. TL drove the entirety of the beat to our model as Logistics and corporate costs were both basically in line. WERN noted a $0.01-$0.02 drag from the Omnitracs ELD outage that was a 100bp drag on utilization.
After the close (2/4/20), YRCW reported 4Q adjusted EBITDA of $47M, down 39% y/y and below our $51M expectation. Excluding gains on sales, YRC Freight reported a 99.5% OR, 175bp worse y/y and 150bp worse than our expectation. Meanwhile, Regional reported a 100% OR, 360bp worse y/y but 150bp better than we expected.
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